Tesla: From an Automaker to a Clean Energy Company

Elon Musk, 44, is not content with selling you an electric car – he wants to control how you power it, too. In fact, the world’s most risk-loving CEO has big plans to expand Tesla Motors’ business and make it incredibly easy for customers to generate their own energy, for their cars and for their entire homes.
It was only last year that the company launched Tesla Energy, a scheme to sell large batteries for domestic and industrial energy storage. And now the company wants to complete the pack: on June 22nd Tesla offered 2.86 billion dollars to acquire SolarCity, a firm that offers complete solutions to ditch fossil fuels and run your home entirely on sun power.

However, some may argue that Solarcity was already under Musk’s control: he was the Chairman of the Board and a powerful shareholder owning 22% of the company’s issued shares. In addition Lyndon Rive, SolarCity’s CEO, is Musk’s cousin.

A move triggered by family bonds or mere private profits? Not really.
On the date of the announcement, SolarCity share prices surged, yielding Musk 140 million dollars. On the other hand, he’s also the largest shareholder of Tesla, a much bigger company, whose share price dropped 11%: Musk’s personal net loss reached a total of $575 billion, just because of the announcement. Not a great start.

Nevertheless, Tesla made quite a good deal: in fact, SolarCity shares were at an all-time-low , as they dropped 60% in value during the last financial year. This was due to the fact that the company shifted its business model: from offering lease of solar panels to an integrated program for buying them, which was “too complicated and unlikely to thrive” according to Wall Street analysts. In fact, the company did not meet its earning forecasts for three quarters in a row, and this led to a much lower valuation.

What Elon Musk is trying to do is to consolidate a clean energy empire at rock-bottom prices, by integrating electric cars, solar power and grid battery storage within the big Tesla family, by taking advantage of its powerful brand and significant economies of scale.

Despite the offer is still contingent on Board approval by both companies, the automaker is going ahead with trademark applications to sell solar products under its Tesla brand. The company’s trademark and copyright attorney at Cooley LLP, Ariana Hiscott, filled 6 trademark applications on behalf of Tesla Motors as early as June 22nd, on the date of the announcement. The trademarks range from solar cells and modules to the installation and repair of solar panels, monitors for solar generation and financing of solar installation. The plan is to sell both Tesla current products and Solarcity’s offering under the same roof, using the same trademark and the same sales force.

In short, Tesla aims to become more than an automaker, by growing into a sustainable energy company and increasing its product offering by expanding into the solar business. As Musk himself told reporters during a press release shortly after the announcement: “The opportunity here is to have a highly innovative, sustainable energy company that answers the whole energy question, from power generation and storage to transport. To this end, we need generation, grid battery storage and electric cars”.

Critics and dropping stock prices signal that Tesla’s push beyond the auto industry, which is highly competitive and hardly mastered, is too far a gamble and the company should stick to its current business. In fact, the introduction of the Tesla Model 3 was very successful and was followed by more than 400,000 deposits for the long-awaited $30,000 sedan.
And yet, the rest of the industry is steadily ramping up its electronic offerings, which shouldn’t cost any more than GPL-powered cars by 2022. The acquisition of SolarCity and the transition from an automaker to a model of clean energy vertical integration can be seen as a response to the launch of electric vehicles by more experienced carmakers (such as Audi, Porsche, GM and many more). And, as electric cars spread, the energy ecosystem must adapt to support them. There are already many auto companies – what the world lacks is sustainable energy companies, and electric cars are only an aspect of that.

In Musk’s vision of clean energy vertical integration, Tesla stores will become a one-stop shop where customers can seamlessly get a solar solution. In the coming future, you could someday walk into one of the Tesla stores popping around all over Europe and the US, and buy rooftop solar panels to turn sunlight into electricity, a brand new car to use that electricity and a 6.4 kWh battery to store anything left over.

Tech@B is a student association empowering visionary game changers at Bocconi. It was founded in February 2014 by a group of friends sharing a passion for technology and the willingness to have a say in making of the future. Tech@B wants to contribute proactively and positively to the advancements of our society spreading the technology culture